Tuesday

May 12, 2020 at 5:00 AM

The people of Worcester, the Commonwealth, and our fellow citizens across the nation deserve our profound thanks for putting the health and welfare of others before their own. Our front-line workers have made enormous sacrifices for the sake of getting this lethal disease under control.

We owe them a debt of gratitude that can never be fully repaid. Our local and state public officials and healthcare and public safety personnel merit congratulations for their calm and careful preparation and competent execution in caring for those who have fallen ill. Unfortunately, we are all going to be called on to make further sacrifices.

To understand Worcester’s economic situation, we need to look at the Commonwealth’s forecast first, since 47% of Worcester’s fiscal year 2020 revenues came from the state, the bulk of that earmarked for public education. A recent report (April 14) from the Massachusetts Taxpayers Foundation (MTF) assesses the state’s fiscal condition. MTF forecasts that because of the shutdown of most businesses, the Commonwealth will collect $4-$6 billion, or at least 14.1 percent less in revenues than anticipated, for the current fiscal year. A more recent and optimistic report from the Baker Administration projects that even with a 39% reduction in revenue collections for April, May, and June, the state can meet its obligations for the remainder of this fiscal year.

In addition, the state has a $3.5 billion rainy-day fund which it hopes not to have to tap into until the next fiscal year. MTF expects unemployment for the second quarter to reach 18 percent, or a loss of 570,000 jobs. Under current conditions, Governor Baker has no intention of raising taxes. Nor is he counting on any bailout from the federal government, unlike the governors such other states as New York, New Jersey and Illinois. Like all states, however, Massachusetts is expecting reimbursements from FEMA for expenses related to COVID-19.

Nonetheless, according to both MTF and Moody’s credit rating service, the Commonwealth, while able to survive financially through the remainder of the fiscal year, faces a tough slog for the next couple of years due to the effects of the economic shutdown. Moody’s projects that while there will be a “snap-back” in the third quarter of 2020, a full job recovery won’t occur until the fourth quarter of 2023. MTF confirms this projection, noting that the Commonwealth fared worse than the rest of the nation in the last three of four recessions. It expects our recovery to be steeper and longer than the rest of the nation with one million jobs likely affected.

Moody’s ranks Boston 15th among the most vulnerable metropolitan areas nationwide to the economic effects of the pandemic. Its calculation is based on the total number of COVID-19 cases (Massachusetts is currently third in the nation), the percent of the population over 65, past levels of migration, level of international travel, past number of airline passengers and exports, number employed in tourism and finance, and reliance on oil and agriculture.

MTF estimates that residents of the Commonwealth have lost $10 trillion, or 30 percent of their personal wealth, since Feb. 19. The impact of the losses, especially on retirement accounts, will make consumers, particularly baby boomers, highly cautious about purchases once the economy re-opens. Meanwhile, Jerome Powell, chairman of the Federal Reserve, forecasts that progress in combating the virus will dictate the timetable of the nation’s recovery. He predicts that full consumer confidence and engagement will not be restored until a vaccine is found.

What is the impact of all this bad news on the city of Worcester? For starters, the city manager prudently instituted a hiring freeze as of April 6 and restricted discretionary spending for non-salary expenses. The recently-released FY 2021 budget indicates an overall increase of 4.5% as a result of a 2.5% increase in property taxes ($8.3 million) plus the value of new construction ($5.25 million) and increases in Chapter 70 funds because of the passage of the Student Opportunity Act. (Local aid from the state and local receipts are the other sources of City revenue.)

Substantial unemployment is likely to delay property tax and excise tax payments. The closure of retail stores, restaurants and entertainment venues will severely impact state sales tax receipts, meal taxes and hotel/motel taxes. Halting construction projects will affect the collection of licenses and fees associated with that sector. Thus, none of the projected revenues are likely to meet their normal benchmarks for at least FY21 and perhaps beyond.

What are the city’s options? During the Great Recession of 2009, the city eliminated 308 positions, 99 through layoffs. It also eliminated a wide range of municipal services such as summer youth programs. What non-essential services can be eliminated now? Do we need a municipally-run Senior Center costing over $400,000 yearly when such functions are already performed by non-profit agencies such as the YMCA/YWCA and the JCC – let alone add a fitness center (as the manager’s FY21 budget calls for) at an initial operating cost of $53,000 for some seven months, when Worcester already abounds in fitness facilities? (Annual fees at private facilities run as little as $26 monthly.)

Do we need an Office of Youth Services when its recreational programs functions are duplicated by the YMCA/YWCA, the JCC, and the Boys and Girls Club? Should the city own a municipal golf course paid for by taxpayers? With most public employee union contracts expiring June 30, shouldn’t municipal employees forego pay raises for the next couple of years or increase their health insurance contribution in lieu of laying off fellow workers? No-fault circumstances require such sacrifices.

While the picture presented above appears rather bleak, there are opportunities in the private sector (which has already made significant contributions during the pandemic, including manufacturing and donating protective equipment and paying salaries of workers while companies are closed), which may speed our recovery. There are investment opportunities that may prove profitable because they are being bought at a discount.

These include investment in telemedicine and e-commerce, healthcare companies and research, and improvements in how people work and exercise from home, along with improvements in teleconferencing with Zoom and Netflix or developing new platforms for meetings and events. Worcester has both the infrastructure and the inventors with its colleges, hospitals and healthcare facilities, and biomedical research to grasp these opportunities.

To quote Worcester’s city manager, “Let’s plan for the worst and hope for the best.” But what New York City Councilman Chaim Deutsch recently observed of his city applies no less to Worcester: “We need leadership that can look past a progressive agenda to make the tough decisions, slashing unnecessary expenditures” so as to maintain “the most vital services that keep our city running.”

Roberta Schaefer is the founder and former president of Worcester Regional Research Bureau.